Bid Ask

Spot rate $1.30/1 pound $1.35/1 pound

3 months forward $1.305/1 pound $1.351/1 pound

6 month forward $1.3012/1 pound $1.3515/1 pound

You are a US importer buying salmon from the UK. Assume you will need to have 1 million pounds for your salmon.

a. Suppose you can only use the spot market. What is your total dollar cost? (choose either the bid or ask and make the conversion based on 1 million pounds)

b. If you are able to buy in both spot and forward markets, where is it cheaper to buy pounds? What is the new total dollar cost?

(No interest rate is mentioned in problem)